Public Accounts Committee pulls up finance ministry for paying interests on income-tax refunds

NEW DELHI: The Public Accounts Committee has pulled up the finance ministry for paying interests on income-tax refunds without Parliament approval. The government has refunded Rs 37,365 crore in the last five years as interest, apart from tax refunds.

“Parliamentary supervision and control over public funds is a must. This irregularity should not go on,” PAC chairman Murli Manohar Joshi said at a press conference here on Tuesday.

The parliamentary panel, in its recommendations based on CAG report, said the revenue department of the finance ministry had been classifying interest on refunds of taxes as ‘reduction in revenue’ instead of treating it as expenditure by netting off interest on refunds from tax receipts rather than including this expenditure item in budget estimates.

“You are withdrawing from the consolidated fund so it should be expenditure,” Joshi said. As per article 114(3) of the Constitution, no money can be withdrawn from the Consolidated Fund of India except under appropriation made by the law. PAC, in its report presented to Speaker Meira Kumar last month, described the expenditure of Rs 37,365 crore on interest payments on refunds as ‘blatant disregard’ to constitutional provision.

It said a constitutional provision cannot be disregarded with ministerial approval on ground of administrative constraints. The committee has asked the ministry not to withdraw from the consolidated fund except under appropriation made by the legislature and to work out a proper accounting procedure in conformity with constitutional provisions.

The committee was of the view that reporting interest liability to Parliament would ensure greater transparency in financial administration, reduce interest burden and bring efficiency in tax administration.